Morguard Investments Ltd.

Morguard’s talents were realized on Two Developments in Canada. In the real estate investment advisory and property management industry, innovative thinking has a direct correlation to market success, and Morguard Investments Ltd. is proof of that. Since it was founded in 1975, the Mississauga, Ontario-based company has grown to become one of Canada’s leading real estate investment consultants and property managers with more than $9 billion in assets under its supervision and more than 40 million square feet of office, industrial, retail, residential and mixed-use properties in its portfolio.

The company employs more than 800 individuals in nine offices across the country.The key attribute that distinguishes Morguard Investments from its competitors is its ability to source successful properties and manage them on behalf of its clients for competitive returns, says Margaret Knowles, senior vice president of development. She stands by the company’s belief that smart investments are not just a service provided to its clients, but also an obligation. “If you think of us as an agent for the owners, we have the responsibility to make sure that we are investing in properties on their behalf that are going to perform well,” Knowles points out. “We want to make sure the folks whose pensions are invested have a secure retirement with good returns from these properties.”

Morguard’s highly experienced executive team boasts exemplary management skills and a willingness to think creatively, whether it is incorporating the latest building technologies or embracing new trends in sustainable construction. Regardless of economic conditions, Morguard always finds opportunities and achieves results, she says. “We look for market-dominant and opportunistic real estate, bringing expertise from a leasing, asset management and development point of view so we can make the property a stronger performer,” Knowles states.

Two Cases in Point

Morguard’s market savvy and real estate expertise are effectively displayed on the Bramalea City Centre mall expansion in Brampton, Ontario, and Uptown Shopping Centre in Saanich, British Columbia, on Vancouver Island.Although Bramalea City Centre and Uptown Shopping Centre are located on opposite ends of Canada and vary in size and scope, there is one distinct characteristic that the two projects have in common. “Both projects have created and will continue to create value for the investors,” Knowles remarks. “It really shows their wisdom for making these investments at the right time and taking on the opportunities and risks associated with developments that have rewarded them accordingly.”

Uptown Shopping Centre

When construction concludes on the second phase of the $400 million Uptown Shopping Centre in summer 2012, Saanich will be home to a world-class lifestyle shopping plaza never before seen in Canada, Knowles asserts. The 800,000-square-foot development will consist of 500,000 square feet of retail space and 300,000 square feet of office space. With two acres left to develop, future phases could bring residences or more commercial spaces to the area, depending on market conditions, she says.Designed by Chandler Associates Architecture and Design designers, the street-lined shops, lush landscaping, storefront parking and community gathering spaces are reminiscent of a small European community that has evolved over time.

Dense Urban Core

The Uptown Shopping Centre site serves as a nexus to all major transportation routes serving southern Vancouver Island, and as a result, has attracted the attention of retail giants like Walmart and Best Buy. “You cannot go to the airport or anywhere in Victoria without passing the site, so from a retail location point of view, it couldn’t be better,” Knowles remarks. Its premium location inspired Morguard to maximize the property to its fullest potential, transforming it from a would-be suburban sprawl power center to a dense urban core. Land availability on an island is not easy to come by, which is why commercial land in Victoria is around $2 million an acre, Knowles notes. So, the best way to maximize the property value for its investors is to add more density to the existing footprint, she explains. The amount of retail and commercial office space being developed on the 18-acre property would typically take up to 54 acres, she says.However, the site’s 35-foot level change offers opportunities for retail tenants to have multi-level stores. For instance, Walmart is two levels. The 250,000-square-foot structure is raised on columns over one level of parking, with a massive parking structure behind it that runs the entire length of the site. The new layout has worked out well for Walmart, Knowles adds. “It’s one of the top three in the country since it opened last July, so it’s doing really well,” she says.

New LEED Designation

Uptown Shopping Centre follows the LEED for Neighborhood Development program for sustainable community development, and at least five buildings are being submitted for LEED Gold designation, Knowles says. "It’s cutting edge,” she remarks. “No other development in Canada with this amount of retail is going for LEED Gold core and shell with the number of buildings that we’re doing in this development.”Some of its green features include a low-energy, un-insulated pipe system that can transfer energy between the retail and office buildings; a rooftop rainwater harvesting system; low-flow fixtures; an indoor air quality management system; efficient lighting; green roofs and green walls. However, one of the project’s greatest sustainable attributes is its densification and thorough land usage.

However, building a dense and complex urban development such as Uptown Shopping Centre requires the expertise of an experienced construction manager, which is why Morguard awarded the task to the Quebec office of Magil Construction International in a joint venture with Ontario-based Vanbots Construction. Vanbots was a co-owner of Magil when the project began in May 2008, but after Vanbots was acquired by Carillion Canada in October 2009, Magil opted not to join the reorganized corporation. As a result, the two companies are working as joint-venture partners on the project.

The building component of the project is mainly constructed of structural steel and precast hollow core, and planks with slab bands of poured-in-place concrete. To achieve on a tight schedule the open storefronts often associated with open-air shopping centers, Vanbots and Magil are substituting a cross-bracing system with full-moment connections that are welded together for a more rigid frame.The contractors crushed the concrete slab and footings of the former structure on site and used the material as blankets to dampen the blast impacts, erosion sediment control and structural fill, thereby reducing the construction waste generated on the project as well as the emissions associated with trucking the waste off site.

Overcoming Challenges

The main challenge associated with Uptown Shopping Centre from a construction point of view is the space constraints associated with a site being developed to its maximum capacity, not to mention the numerous retail and office buildings constructed in phase one that are now open to the public. “We have to keep the customers’ employees and public safe, and allow them to park and access the site,” Knowles says. “It’s a tight site, and all the trailers are stacked on top of each other in a little compound,” she describes. “We’ve moved the compound twice now to make way for development as it’s unfolding, so the compound is sitting on what will be phase three.”

This has been a game-changing project not only for Morguard, but for the commercial real estate industry as a whole because it is setting a new standard for how retail should be developed in North America, Knowles says. “People will soon realize the benefits of multilevel urban development,” she contends. “You’re not going to get away with the one-level big-box development opportunities with the large parking lots in urban markets anymore. That adds to sprawl and from a sustainability point of view, it’s not going to happen anymore. I think Uptown is the way of the future.”

Bramalea City Centre

Brampton has been one of the fastest-growing cities in Canada for quite some time, and Morguard has a number of strong relationships and properties in the area. The $192 million Bramalea City Centre expansion is a shining example of how Morguard can increase a property’s value with strategic zoning, construction and leasing work. The company performed a 350,000-square-foot expansion to a still-operating 1.1 million-square-foot shopping mall from June 2007 to August 2010, with an official opening set for next month. “Right in the middle of construction, we had an economic downturn,” Knowles notes. “That put leasing well behind, but we’re caught up now and have some incredible retailers like BCBG, Joe Fresh, Forever 21 and restaurants like Pickle Barrel and Spring Rolls.”

Morguard has put a lot of effort into Bramalea City Centre since it acquired the property in 2004. “Bramalea is one of those shopping centers that had obviously been market dominant at one point, but the original developer ended up going into bankruptcy and selling off their assets,” Knowles says. “The property was sold to a number of different players, who generated as much revenue as they could with what they had, but for the most part the center was left status quo.”

Ripe for Expansion

Morguard found Bramalea to be a unique opportunity because the site has a central position in Brampton and is zoned for a tremendous amount of density, she says. After it acquired the property, its first objective was to strengthen the existing asset by performing a $25 million renovation to modernize the aesthetics and maximize the space. “The value increase was significant from just the little amount of work we had done,” Knowles comments. “We knew it was time to solidify our base and make sure we are market dominant and competitive for the next decade, so we embarked on an expansion.”In addition to expanding the existing structure, Morguard added some freestanding buildings that included office space, financial institutions and restaurants. The objective was to “make it a one-stop shopping experience with a lot of business services here, as well,” she notes.

The site sits inside a floodplain, so to get the entitlements required to perform the expansion, Morguard negotiated with the local conservation authority and opted to include some green elements such as bioswails, a stormwater retention tank and a green roof. The project was not certified for LEED, however.
Market FluctuationsThe market was booming at the start of the Bramalea City Centre expansion, and the prices for certain commodities were unreasonably high, Knowles recalls. “We were holding our breath because steel and copper, for example, were very volatile, and that affects the price when we were getting our shop drawings in and ordering the steel,” she says. “We were certainly impacted on our steel price.”

There also were some unforeseen site conditions the company had to contend with, as the area under which most of the expansion was taking place once belonged to a dry cleaner whose tanks leaked and contaminated the soil several decades ago. “This made everything way more complicated because the soil on site had to be remediated and removed,” Knowles says.Midway through the expansion, the Canadian government announced its stimulus program, and what Morguard had hoped would be a favorable labor market turned out to be quite competitive.

Meeting the Schedule

Once again, Vanbots was awarded the project with some additional schedule help from Magil. Overall, Morguard was extremely satisfied by the performance of Vanbots and Magil, and it was pleased with the quality the contractors put into the project. However, Knowles says the company was a little disappointed the schedule wasn’t maintained. “I think we all underestimated what it was going to take to actually get it done and finish it,” she admits. “There were already so many challenges to the schedule and the remediation, which was significant, and the fact that the mall was still open did not help schedule at all,” Knowles says. “We needed to work double time by bringing in extra shifts, and after some initial meetings, I think Vanbots realized we were right,” she continues. “We did everything we could think of creatively to make sure we hit our target, and Vanbots was cooperative throughout while we were trying to help them figure out how to get it done.”

Reflecting on the Work

Although the Bramalea City Centre expansion was a success, there were many lessons to be learned with regard to communication with the subcontractors and maintaining the tight timeline in which the work needed to be completed. “The most important lesson from the expansion of Bramalea City Centre, I believe, is that as soon as you recognize schedule challenges, you need to work with and challenge your team to rethink and retool the work plan to see if there are ways  to become more efficient and permit trades to get in and get finished in their respective disciplines,” Knowles says. “And you need to communicate that to the trades and involve them in the reorganization.”

Bringing Magil in to help speed things along helped the schedule tremendously, Knowles says. “Vanbots stepped up and got it done, so my attitude is kudos to them,” she says. “The majority of our trades performed well and delivered an excellent finished project. The Vanbots team and our own project management team and mall operations group did a phenomenal job in ensuring the millions of visitors to the mall and the workers on site remained safe throughout the construction program. “We all would have loved to have completed the project on a shorter time frame – which has affected our capital budget – but we’re done, and we look forward to getting it completed with the final leasing,” Knowles adds. “The owners of Bramalea City Centre continue to see capital appreciation of their investment, which is a direct result of the renovation and expansion, so they are very pleased with the performance of the shopping center.”

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